courts themselves without doubt, some with the patent bar, some with the Patent Office, and some with the Congress for failing to provide adequate support for the administration of the patent system. A solution is by no means easy, but I will have some tentative suggestions to present below.

2. Economic concentration and monopoly through patents

The increase in the technical complexity of science and the inventive process has had another result of even greater challenge to the patent system. The patent system functions best when unique devices or processes are independently protected by a single patent. The system does not provide adequately for the appropriate handling of complex developments involving devices covered by many patents. As a result, undesirable situations have arisen. For example, through the interchange and retention by the interchanging group of exclusive operating rights under patents, a strong group of industrial units is able to dominate a whole field of manufacture, not merely for the statutory term of a patent grant, but in perpetuity by absorbing in one way or another improvements wherever they appear. The licensing of patents and the exchange of patent rights among patent owners is fundamentally in the public interest when it facilitates manufacture, but it should not be allowed to extend to the point of creating a permanent monopoly over a field of commerce. A permanent monopoly is inconsistent with the whole philosophy of the patent system. When such a monopoly is created through the interchange of licenses, however, the remedy which best serves the public interest is not the curtailment of the licensing or the destruction of the patents, but rather the expansion of the group under license. In this way the public will be assured of the product in question in adequate quantities and at reasonable prices. But the remedy of expanding the group under license is not now often utilized by the courts, and it is not inherently beneficial unless wisely provided for. There are beneficial patent pools, and those which are quite the reverse. It would enable business to proceed with more assurance, and far more effectively, if there were defined in the law the conditions under which cross licensing of patents is in the public interest.36

37

I realize full well that this aspect of the problem, that of patent pooling, is a difficult and intricate matter. Certainly, I would not attempt to present and defend a solution in a brief statement. Rather it calls for a thorough and objective study by a fully representative group, including men with experience in patent litigation, at the bar and on the bench, but including also those who understand the trends of science and its applications, and those who have struggled with the vicissitudes of infant industrial units. I believe it would be very help

3 For one proposal to this end, see A New System for Encouraging Invention, by Gilfillans, Journal of the Patent Office Society, vol. 17, December 1935, pp. 966-970.

37 The literature on patent pooling is, of course, extensive. See, for example: Patent Pools and Cross-Licenses, by Toulmin, Virginia Law Review, vol. 22, December 1935, pp. 119-152.

U. S. Congress, House Committee on Patents, Pooling of Patents, hearings on H R. 4523. February 11-December 12, 1935, Washington, U. S. Government Printing Office, 1936.

The United States Patent System, by Vaughan, Norman, University of Oklahoma Press. 1956, ch. 2, Patent Pools, pp. 39-68.

Compare also my testimony on patent pools before the Temporary National Economic Committee on January 17, 1939, in TNEC hearings, pt. 3, January 16-20, 1939, pp. 887-890.

ful indeed if this set of hearings were followed by a comprehensive study of the problem under congressional auspices, to be followed by the formulation of constructive legislation. It is relatively easy to state some of the aspects of the problem which such a study should tackle. The central puzzle is that of patent pooling, that is, the interchange of licenses among holders of patents. At first this seems very simple, but it certainly is not. Suppose there are two manufacturers, each of whom holds patents, but that these overlap so that neither can put out a fully satisfactory device without infringing the patents of the other. Certainly it would seem to be in the public interest that they should cross-license and proceed, rather than to continue where each puts out a device that is less adequate than the state of the art dictates. But suppose there is a third manufacturer with a patent or two in the field, and he is not admitted to the group. Is he to be left in the position where he must fold up, supply an inferior device, or sell out for a song to the combined group? An easy solution would appear to be to require that all pools be open pools, that is, when crosslicensing occurs at all to provide that all comers must be licensed at reasonable royalties. 38 But on close examination this will be seen to be highly defective. Consider such an open pool in existence, and an independent inventor who makes a striking advance in the field. Is he to be required to deliver his rights for a small royalty, to be determined by some committee of the pool? What he needs is an exclusive position for a time, so that an industrial effort may be built about his advance, and his contribution may be so unique that what he requires in the way of licensing from the pool is essentially minor. The situation is of course worse when there is no pool at all, and a single company controls a whole field through its patents. " Then the inventor cannot possibly enter the field and he has only one customer, and is rather strikingly in a buyer's market. And every new patent thus acquired strengthens the company's position and perpetuates the monopoly. There is a good deal of evidence that we had just this sort of situation for some years in the shoe machinery field. 40 But a fully open pool has its disadvantages. What incentive is there, for a member of the pool or an outsider, to work for years at great expense to develop a radically different technical solution for the problems of an industry, if the outcome is that every manufacturer will promptly adopt his advance and he will receive only small royalties? The justification of courageous pioneering lies in the possibility of realizing large profits when success is attained, sufliciently large to submerge the costs of inevitable failures and disappointments. An industry fully crosslicensed at small royalties, is likely to be pedestrian in its advances. It will probably not support research programs of the highest order, un

3 See U. S. Attorney General's National Committee To Study the Antitrust Laws, Report, March 31, 1955, pp. 242-247.

U. S. v. Radio Corporation of America, complaint, November 1954.

40 See the several shoe machinery cases:

United States v. Winslow, 227 U. S. 202 (1913).

United States v. United Shoe Machinery Company of New Jersey, 247 U. S. 32 (1918). United Shoe Machinery Corp. v. United States, 258 U. S. 451 (1922).

U. S. v. United Shoe Machinery Corp., 110 F. Supp. 295 (Mass. 1953).

Also:

The Shoe Machinery Case and the Problem of the Good Trust, by Keyes, Quarterly Journal of Economics, vol. 58, May 1954, pp. 287-304.

Corporate Concentration and Public Policy, by Purdy, Lindahl, and Carter (2d edition), New York, Prentice-Hall, 1950, ch. 12, Shoes and Shoe Machinery, pp. 229-249.

less, as has indeed been the case in some instances, it takes a remarkably broad point of view in regard to its public responsibility. Its attention will be devoted to minor advances, and to public appeal of relatively inconsequential nature. It is likely to lean on its suppliers for its innovations. This is not the American way. We want vigorous competition, on technical as on all other aspects, and courageous pioneering. True, this may be expensive and cause local distress at times, but these are the price of progress. With all the fine attainments of our automobile industry, especially in the use of mass production processes, I feel that the man from Mars might consider that it does not measure up to American ideals, on the score of radical technical advance, when compared to European attainments." And I believe an unduly soft type of patent handling is one of the reasons for the situation.

On this whole subject of patent pooling we have thus far relied principally upon the antitrust laws. 42 There is indeed an interrelationship, for patents are property, and the improper use of property to limit competition by combinations is properly a subject for antitrust consideration. It has no applicability to the conferring of monopoly rights on an individual by the issuance of a patent, and should not, and comes into effect only when combinations of those rights are involved. But the antitrust laws are a blunt bludgeon with which to deal with the subtleties of the problem of patent licensing. If a combination in restraint of trade appears, of the ordinary sort, a solution in the public interest may be simply to dissolve the combination. But to do so, and leave each fragment with its own patents only would be obviously disastrous. To require general licensing of all comers at small royalties may produce just the deadly inertia and lack of initiative in an industry which the patent system is supposed to forestall. And destroying the patents, by requiring free licensing, may be even worse and in the same direction. The problem of patent pooling is of sufficient moment, and of such extraordinary complexity, to warrant it being covered by its own body of legislation. Industry generally, and judges too, no doubt, would welcome constructive steps in that direction. But the wise formulation of such legislation calls for deep study by a competent group.

In this connection it has been my experience that, among attorneys who practice general law, the prevalence of profound ignorance of the patent structure is at times appalling. In fairness I believe it should be added that among members of the patent bar there are far too few whose broad grasp leads them to understand fully the interrelationships between the patent system, the modern status of applied science, and the economic progress of society generally. But there are some who have the full qualification for objective and thorough counsel and advice, and their efforts should be enlisted.

41 See especially Patents and Competition in the Automobile Industry, by Welsh, Law and Contemporary Problems, vol. 13, spring 1948, pp. 260-277. Also TNEC hearings, pt. 2, December 5-16, 1938, pp. 256-376, 669-735.

42 The many references to this subject include the following:

Patent Property and Antimonopoly Laws, by Barnett, Indianapolis, Bobbs-Merrill Co., 1943. Patents and Antitrust Law, by Wood, Chicago, Commerce Clearing House, 1942.

U. S. Attorney General's National Committee To Study the Antitrust Laws, Report, March 31, 1955, ch. 5. Patent-Antitrust Problems, pp. 223-260.

Patent Pooling and the Sherman Act, Columbia Law Review, vol. 50, December 1950, pp. 1113-1123.

Patent Pooling and the Antitrust Laws, University of Chicago Law Review, vol. 17, winter, 1950, pp. 357-375.

3. Invalidation of issued patents

A common fallacy among laymen, and judges are not free from this disability, is to regard the act of invention as easy-after it has been done, and by hindsight. True, there are altogether too many patents issued on the trivial and the obvious. An appreciable part of the burden on the Patent Office, and on industry, is due to the fact that the standards of invention have not been held sufficiently high, and because a failure to file on a trivial matter may result in the appearance of an embarrassing patent in other hands. But the cure for this does not lie in the destruction of patents by lay judges.43 It lies in improved procedure, developed through careful and thorough study by independent, objective, citizens, who have the scientific and technical background to understand it fully.

We need, badly, freshly defined criteria of invention." The guiding principle should be to provide for the issuance of patents in ways that will most effectively advance the public interest, and by fair rules that are impartially applied to all applications. At present we have too many patents issued on the obvious, but great care is needed in restricting on this front, for many times the apparently obvious does not appear for years, and might not appear at all, if it were not for the thoughts of some clever individual who sees the neat solution we all miss. When a new result, of patentable nature, emerges from long study and research, it is unlikely that the result will be trivial. The Patent Office should not be called upon in any way to evaluate the probable commercial impact of a patent; that is hardly its function. We can be proud of the fact that the citizen who applies for a patent stands on his own feet, and that his arguments are utterly impartially evaluated. The record of the Patent Office in this regard, and in regard to all aspects of fidelity to a public trust, is admirable, and its detached position should be fully preserved. But better criteria of invention would remove a severe load from its back, and from the backs of industry and the courts.

One of the difficulties comes from the frequent tendency to identify patents as such with objectionable monopoly. There are a surprising number of laymen who feel that whenever a patent is destroyed, as by "dedicating it to the public," a public benefit is conferred. This is a strange point of view. It holds that a piece of property, which is what a patent is, created by an act of the Patent Office under the statutes, is in some way evil. No doubt there are times when abolishing a particular patent, if it could be accomplished, would be a good thing, but this is far from a generality. No doubt, also, there are times when "dedication to the public" is justifiable, for example when a quasipublic institution holds a patent on a device which would come into

43 As Supreme Court Justice Jackson, dissenting in Jungersen v. Ostby & Barton Co., 335 U. S. 560, at 572, stated, January 3, 1949:

"It would not be difficult to cite many instances of patents that have been granted. improperly I think, and without adequate tests of invention by the Patent Office. But I doubt that the remedy for such Patent Office passion for granting patents is an equally strong passion in this Court for striking them down so that the only patent that is valid is one which this Court has not been able to get its hands on."

44 See, for example, Efforts To Establish a Statutory Standard of Invention, by Edwards. Prepared for the Subcommittee on Patents, Trademarks, and Copyrights of the Senate Committee on the Judiciary, Washington, Library of Congress, Legislative Reference Service, February 14, 1956, revised to October 15, 1956.

Also, The Nature of Patentable Invention: Its Attributes and Definition, by Hayes, 2d edition, Cambridge, Mass., Addison-Wesley Press; 1948. The Impact of Recent Supreme Court Cases on the Question of Patentable Invention, by Davis, Illinois Law Review, vol. 44, March-April 1949, pp. 41-48.

use whether there were a patent on it or not. But if a patent on a device is thus destroyed, and venture funds would be needed to develop the device and put it into use, the public may not secure the benefit the device could confer for many years if at all.

There is a significant difference here between a patent and other property. For one difference a patent has a limited and specified life. A patent is created to achieve a purpose, namely to further the introduction of new combinations for the benefit of the public. At times it is not needed, as the introduction will occur anyway, and in such cases it can be in effect annulled, by providing for free licensing, without doing any harm. But, even so, it may have been good judgment to apply for it and secure its issuance, in order to ensure that a patent on the same idea would not issue in other hands. Mere publication is a less effective defensive measure than patenting since the former is not a complete barrier against the appearance of a patent, applied for by one who was not the original inventor, if the latter in effect abandons his rights, for publication becomes a barrier only after an interval. Nonprofit organizations, anxious to manage the inventories which may arise in connection with their affairs fully in the public interest are often confronted by a quandary in this regard. And they have no easy way out by merely obtaining patents and announcing that they will license freely without royalty. I have had some experience on this problem. Before the war, when I was located at the Massachusetts Institute of Technology, a colleague and I invented a device which we felt was a worthwhile addition to equipment for data handling. We filed a patent application and arranged that any future income that might flow from it would be made available to MIT. In the pressure of war work the patent application was abandoned. After the war a department of the Government was anxious to obtain such devices for its work. But no commercial concern, naturally, wished to develop such devices at its own expense for sale generally unless its investment in development could be protected. As a result the department paid the full expense of building a machine for its use, but this was a rather special machine and no commercial use followed. I might add that, in this fast moving field, this particular device is now practically obsolete. In this case loss of the patent did, however, in my opinion do real harm. On the other hand, many of us have no doubt seen instances where we felt that a patent stood in the way of progress. Similarly we see cases in which a building is an eyesore, and feel it should be destroyed. In some instances we may tear down such buildings and make a public park, duly compensating the owners of course. But we move with great care in such cases, for inroads upon the principle of the sanctity of private property are not to be undertaken lightly. I doubt whether the same point of view is always present when courts invalidate a patent, and the conditions are indeed not the same. But the cure for the undesirable aspects of the performance of the patent system does not lie in an inclination to invalidate patents generally in any doubtful cases; it lies in bringing the system itself more into tune with modern conditions. And, unfortunately, the result of recent tendencies to invalidate have undermined confidence in the system

45 Cf. the experience of the Wisconsin Alumni Research Foundation, described among other places in American Medical Research, by Shryock, pp. 142-143.